Buy Now Pay Later (BNPL) is a form of debt that lets you access products or services now but pay for them later in a series of interest-free instalments.
Buy Now Pay Later – how it works
You apply for a BNPL account from one of the providers. Be sure to read the terms and conditions so you know the rules before you start.
You purchase goods or services using your BNPL account and get the goods as soon as you make the first payment.
You may not be able to cancel the sale once you make the first payment.
Payments are locked in, usually weekly or fortnightly and may be automatically deducted from your bank account. If you miss a payment, default fees may be charged.
You can return faulty goods and get a repair, replacement, or refund on your payments to date.
Pros and cons
Buy Now Pay Later contracts can help smooth out your spending, so long as you don't buy more than you can afford. But remember, it is a form of short-term debt.
With no interest to pay, it can be a better alternative to high-interest options like credit cards or personal loans.
Like all debt, there are risks including:
- spending more than you expect, or buying items on impulse that you can’t afford
- no longer being able to afford repayments if your life changes, for example, job loss or rent increase
- extra costs in the form of late fees if you miss payments — making your item more expensive. This may also affect your credit rating.
Before agreeing to purchase a good or service using BNPL, ask yourself if you are good at:
- tracking your spending, and
- keeping up to date with payments.
If you find you are using BNPL to buy everyday necessities like food and petrol, you can talk to a community budgeting advisor to help you manage your money. The Money Talks helpline gives free budgeting advice to individuals, family and whānau. They can also put you in touch with a local budgeting service and help with issues you're having with lenders.
You can find budgeting advice and tools on the Sorted website.
Rules and rights
The Credit Contracts and Consumer Finance Act (CCCFA) protects you when you borrow money or buy products or services on credit.
BNPL providers must comply with many of the same requirements as other lenders and act in line with the responsible lending principles set out in the Credit Contracts and Consumer Finance Act (CCCFA) and Credit Contracts and Consumer Finance (Buy Now, Pay Later) Amendment Regulations 2023.
BNPL lenders must:
- provide key information to you about your contract and any changes to your contract, including the timing and amount of default fees that could be charged
- conduct credit checks to make sure you can afford the loan without suffering substantial hardship (including when you ask for your credit limit to be increased)
- help you understand what you are signing up to before you sign
- treat you fairly — this includes assisting you to make informed decisions, and how the lender behaves when you can't pay
- provide information about the external dispute resolution scheme they’re part of if you make a complaint or hardship application
- provide you with information miss payments about financial mentoring services.
If a lender breaks these rules, you can apply to your lender to have your contract changed or cancelled. You will be able to receive compensation and statutory damages from lenders who breach these rules.
If the lender does not agree, you can complain to their dispute resolution scheme or the Disputes Tribunal.
There are four financial dispute resolution schemes. To find out which your lender belongs to, you can either:
- ask your lender
- phone or email any of the four dispute resolution schemes.
Financial dispute resolution schemes
If things go wrong
If you are unable to make BNPL payments
Talk to your BNPL provider. You have the right to request changes to a credit contract if unforeseen circumstances cause hardship. For example, illness, injury, loss of employment, or the end of a relationship.
You can only make one hardship application on the same grounds within any four-month period, unless the BNPL provider agrees to consider another application.
What to do if you are struggling with debt — Commerce Commission(external link)
A free financial mentor can help you prepare or they can talk to the lender for you. Start by contacting the free helpline at MoneyTalks.
Contact information — MoneyTalks(external link)
If your BNPL provider goes out of business
If you still owe money on something you bought on BNPL, you still must make your payments. There is no risk you will lose your products because you already have them.
Other issues or faulty products
Once you have received your items, the process for dealing with issues is the same as for anything else you buy. If you wish to return the product you must follow the return policy of the business you purchased the product from.
The Consumer Guarantees Act and Fair Trading Act apply to all products and services purchased in New Zealand. If the product is faulty or you are unhappy with the quality of the product you can ask the business you purchased it from for a refund, repair or replacement.
If the business agrees to provide a refund, it will be credited to the BNPL account you used to make the purchase. You can either leave the additional funds in your BNPL account as a credit to use for a next purchase or ask the BNPL provider for a refund to a nominated bank account.
Consumer Guarantees Act
Fair Trading Act
Use our Consumer Rights Finder to help you understand your consumer rights when things go wrong.